AIA Close to Snapping ING

ING Groep NV  is close to selling its fast-growing Malaysian life insurer to Asian insurer AIA Group Ltd., the first fruits in a broad dismantling of its Asian insurance operations. The sale, and accompanying auctions for other Asian insurance operations, represents yet another European firm selling once-prized Asian assets in the wake of the global financial crisis. These disposals have often been tied to repayments of taxpayer bailouts or demanded by regulators to make financial institutions simpler and more focused on their home markets.

ING is the latest European company looking to sell once-prized Asian assets. The Dutch company is close to selling its Malaysian life insurer. In the case of ING, European regulators made asset sales a condition of winning retroactive approval for its €10 billion ($12.9 billion) bailout by the Dutch state in 2008. It will be left with its commercial and retail banking business in the Asia Pacific region, which fits with its new, banking-focused strategy.

It is unclear what price ING, the Netherlands' largest bank by assets, will get for its Malaysian assets, or for all of the Asian assets it is selling. The Dutch insurer has said that its Japanese, Korean and Southeast Asian insurance operations had a combined book value under international financial accounting rules of €6.1 billion, or about $7.9 billion.

ING, whose presence in Asia dates back to 1857, had built itself into one of the largest foreign life insurers in Asia by annual premium equivalent, a common sales measure among insurers, analysts say. The Dutch firm has been selling life-insurance policies in Asia since the early 1980s and has insurers in South Korea, Japan, Malaysia, Hong Kong and Thailand. It also has joint ventures in mainland China and India and an investment-management business in Asia, all of which it plans to sell.

For buyers like Hong Kong-based AIA, the ING sale represents a rare opportunity to bulk up in a fast-growing region and acquire valuable banking partnerships through which insurers can distribute their products, a process that otherwise can take years to do organically.

The biggest attraction among the ING assets that are being sold has been Southeast Asia. Insurers around the world have called it a sweet spot, given the regions' growth prospects. As an expanding middle class seeks to protect rising living standards, life-insurance premiums are expected to increase 6.6% next year, compared with 2.3% growth in the U.S., according to estimates from reinsurer Swiss Re. Overall, however, the size of the region's life insurance market is still dwarfed by the mature U.S. market.

ING is ranked fourth in Malaysia by gross written premiums and ninth in Thailand, according to analysts. AIA already has a presence in both countries.

Toronto-based Manulife found it hard to compete with AIA for ING's Southeast Asian assets. The Canadian company, which initially bid for all of ING's life insurance operations, also faced opposition from shareholders, who would be asked to buy new shares to finance the deal. Manulife has targeted Asia as a key growth market and is in 11 Asian countries.